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Definition of Covariance
A measure of the degree to which returns on two assets move in
A statistical measure of the degree to which random variables move together.
The covariance between a variable and the lagged value of the variable; the same as
A standardized statistical measure of the dependence of two random variables,
A statistic in which the covariance is scaled to a
covariance of a national economy's rate of return and the rate of return the world economy
An assumption of Markowitz portfolio construction that investors
The effective reduction of risk (variance) of a portfolio, achieved without reduction
Weighted sum of the covariance and variances of the assets in a portfolio.
Corporate bonds arranged so that specified principal amounts become due on specified dates.
Often referred to as bullet-maturity bonds or simply bullet bonds, bonds whose principal is
A line representing equilibrium in the goods and services market, on a diagram with aggregate demand on the vertical axis and aggregate supply on the horizontal axis.
Part of the return that is not due to systematic influences (market wide influences). In
The sum of all the interest options in your policy, including interest.
An amount of money invested plus the interest earned on that money.
A merger or consolidation in which an acquirer purchases the selling firm's assets.
The net present value analysis of an asset if financed solely by equity
Allocation base A measure of activity or volume such as labour
hours, machine hours or volume of production
approximated net realizable value at split-off allocation
a method of allocating joint cost to joint products using a
Any possession that has value in an exchange.
A resource, recorded through a transaction, that is expected to yield a benefit to a
Something that is owned; a financial claim or a piece of property that is a store of value.
Probable future economic benefit that is obtained or controlled by an entity as a result of
Anything owned by, or owed to, an individual or business which has commercial or exchange value (e.g., cash, property, etc.).
All things of value owned by an individual or organization.
Asset activity ratios
Ratios that measure how effectively the firm is managing its assets.
Asset allocation decision
The decision regarding how an institution's funds should be distributed among the
Bond or note secured by assets of company.
A security that is collateralized by loans, leases, receivables, or installment contracts
Methods of financing in which lenders and equity investors look principally to the
Loans granted usually by a financial institution where the asset being financed constitutes the sole security given to the lender.
Categories of assets, such as stocks, bonds, real estate and foreign securities.
Extent to which a company's net assets cover a particular debt obligation, class of preferred stock, or equity position.
A bond indenture restriction that permits additional borrowing on if the ratio of assets to
The ratio of total assets to stockholder equity.
Asset for asset swap
Creditors exchange the debt of one defaulting borrower for the debt of another
Also called surplus management, the task of managing funds of a financial
The weighting of assets in an investment portfolio among different asset classes (e.g. shares, bonds, property, cash, overseas investments.
Asset pricing model
A model for determining the required rate of return on an asset.
Asset pricing model
A model, such as the Capital asset Pricing Model (CAPM), that determines the required
The amount of total risk that can be eliminated by diversification by
A firm's investing in assets that are riskier than those that the debtholders expected.
Asset substitution problem
Arises when the stockholders substitute riskier assets for the firm's existing
An interest rate swap used to alter the cash flow characteristics of an institution's assets so as to
The ratio of net sales to total assets.
a ratio measuring asset productivity and showing the number of sales dollars generated by each dollar of assets
asset turnover ratio
A broad-gauge ratio computed by dividing annual
A firm's productive resources.
Anything of value that a company owns.
Things that the business owns.
Items owned by the company or expenses that have been paid for but have not been used up.
A common element of a financial plan that describes projected capital spending and the
Average (across-day) measures
An estimation of price that uses the average or representative price of a
The amount of cash payable on a benefit.
With respect to convertible bonds, the value the security would have if it were not convertible
Book yield is the investment income earned in a year on a portfolio of assets purchased over a number of years and at different interest rates, divided by the book value of those assets.
A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
An asset’s cost basis minus accumulated depreciation.
The value of an asset as carried on the balance sheet of a
An asset’s original cost, less any depreciation that has been subsequently incurred.
Net worth of the firm’s assets or liabilities according
book value and book value per share
Generally speaking, these terms
BOOK VALUE OF COMMON STOCK
The theoretical amount per share that each stockholder would receive if a company’s assets were sold on the balance sheet’s date. Book value equals:
Book value per share
The ratio of stockholder equity to the average number of common shares. Book value
Book Value per Share
The book value of a company divided by the number of shares
an activity that is necessary for the operation of the business but for which a customer would not want to pay
an asset used to generate revenues or cost savings
A fixed asset, something that is expected to have long-term usage within
Capital asset pricing model (CAPM)
An economic theory that describes the relationship between risk and
Capital Asset Pricing Model (CAPM)
A model for estimating equilibrium rates of return and values of
capital asset pricing model (CAPM)
Theory of the relationship between risk and return which states that the expected risk
CAPITAL IN EXCESS OF PAR VALUE
What a company collected when it sold stock for more than the par value per share.
Capitalized Cost An expenditure or accrual that is reported as an asset to be amortized against
CARs (cumulative abnormal returns)
a measure used in academic finance articles to measure the excess returns an investor would have received over a particular time period if he or she were invested in a particular stock.
An amount the insurance company will pay if the policyholder ends a whole life
Cash Surrender Value
This is the amount available to the owner of a life insurance policy upon voluntary termination of the policy before it becomes payable by the death of the life insured. This does not apply to term insurance but only to those policies which have reduced paid up values and cash surrender values. A cash surrender in lieu of death benefit usually has tax implications.
Cash Surrender Value
Benefit that entitles a policy owner to an amount of money upon cancellation of a policy.
Cash value added (CVA)
A method of investment appraisal that calculates the ratio of the net present value of an
Conflict between bondholders and stockholders
These two groups may have interests in a corporation that
Continuous random variable
A random value that can take any fractional value within specified ranges, as
An offset to an asset account that reduces the balance of the asset account.
Also called parity value, the value of a convertible security if it is converted immediately.
Typically the cash, accounts receivable, and inventory accounts on the
value of cash, accounts receivable, inventories, marketable securities and other assets that
Cash, things that will be converted into cash within a year (such as accounts receivable), and inventory.
Amounts receivable by the business within a period of 12 months, including bank, debtors, inventory and prepayments.
Current refers to cash and those assets that will be turned
Cash and other company assets that can be readily turned into cash within one year.
an unknown item for which a linear programming
Deferred Tax Asset
Future tax benefit that results from (1) the origination of a temporary difference
degree of operating leverage
a factor that indicates how a percentage change in sales, from the existing or current
degree of operating leverage (DOL)
Percentage change in profits given a 1 percent change in sales.
an unknown variable that is to be predicted
Discrete random variable
A random variable that can take only a certain specified set of discrete possible
Dynamic asset allocation
An asset allocation strategy in which the asset mix is mechanistically shifted in
Economic Value Added (EVA)
Operating profit, adjusted to remove distortions caused by certain accounting rules, less a charge
economic value added (EVA)
a measure of the extent to which income exceeds the dollar cost of capital; calculated
economic value added (EVA)
Term used by the consulting firm Stern Stewart for profit remaining after deduction of the cost
A value determined within the context of a model.
Also called abnormal returns, returns in excess of those required by some asset pricing model.
Exchange of assets
Acquisition of another company by purchase of its assets in exchange for cash or stock.
The amount of advantage over a current market transaction provided by an in-the-money
The value that an asset is expected to have at the time it is sold at a predetermined
A variable whose value is determined outside the model in which it is used. Also called
The weighted average of a probability distribution.
The value of the possible outcomes of a variable weighted by the
Expected value of perfect information
The expected value if the future uncertain outcomes could be known
Extraordinary positive value
A positive net present value.
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